Custom, Excise & Service Tax Tribunal
(1 To 8): M/S. Sampre Nutrition Limited vs (1 & 8): The Commissioner Of Customs & on 19 January, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Central Excise Appeals Nos.: (1 & 2): E/1244 & 1245/2004;
(3 to 7) E/534 to 537/2005;
(8) E/740/2005; (9)E/965/2005;
(10 & 11):E/1102 & 1103/2005;
(12) E/131/2006 and (13)E/280/2006
(Arising out of Orders-in-appeals Nos.
(1 & 2): 65 & 66/2004 (H-IV)CE dated 28.07.2004;
(3 to 7): 212 to 215/2004(H-IV)CE dated 28.12.2004;
(8) 205/2004 (H-IV)CE dated 21.12.2004;
(9) 94/2005(H-IV) CE dated 29.07.2005;
(12)118/2005(H-IV) CE dated 28.10.2005; and
(13)129/2005(H-IV) CE dated 30.12.2005
Arising out of Order-in-Original No.
(10 & 11): 20/2005 dated 06.09.2005 passed by the Commissioner of Customs and Central Excise, Hyderabad-IV Commissionerate.)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3.
Whether their Lordship wish to see the fair copy of the Order?
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
Yes
(1 to 8): M/s. Sampre Nutrition Limited
(9, 12 & 13):M/s. Roys Industries Ltd.
(10) M/s. Prayagh Nutri Products Private Ltd.
(11) Mr. Preetam B. Lalwani, Managing Director
M/s. Prayagh Nutri Products Private Ltd.
Appellants
Vs.
(1 & 8): The Commissioner of Customs &
Central Excise (Appeals), Hyderabad
(9, 12 & 13) The Commissioner of Central Excise
(Appeals-II), Hyderabad
(10 & 11): The Commissioner of Customs and
Central Excise, Hyderabad-IV
Commissionerate
Respondents
Appearance Shri B.V. Kumar, Advocate, for the appellants Shri Ganesh Haavanur, Additional Commissioner (AR), for the respondents CORAM MR. P.G. CHACKO, HONBLE MEMBER (JUDICIAL) MR.B.S.V. MURTHY, HONBLE MEMBER (TECHNICAL) Date of Hearing: 19.01.2012 Date of decision: 19.01.2012 FINAL ORDER Nos._______________________2012 [Order per: P.G. CHACKO]: In all the appeals, barring E/1103/2005, the challenge is against assessment of the goods under Section 4A of the Central Excise Act. The appellant in Appeal No. E/1103/2005 is aggrieved by the imposition of a penalty. All other appellants (assessees) paid duty on their products in terms of Section 4 of the Act during the relevant periods. Show-cause notices were issued to them by the department alleging that the goods were liable to be assessed to duty on the basis of MRP under Section 4A of the Act. The assessees contended that they were not required to indicate MRP on their products under the Standards of Weights and Measures Act, 1976 and the rules framed thereunder and, therefore, Section 4A of the Central Excise Act was not applicable. This contention, however, came to be rejected for the reasons stated in the impugned orders.
2.1. The essential particulars of the appeals are as tabulated below:-
Appeal No. Name of the appellant (assessee) Description of goods Period of dispute Impugned order Duty demand E/1244/2004 Sampre Sugar confectionery 01.09.2000 to 22.07.2001 O-i-A No. 65/2004 dt:28.07.2004 Rs. 28,66,491/-
Appeal No. Name of the appellant (assessee) Description of goods Period of dispute Impugned order Duty demand E/1245/2004 Sampre
-do-
07.05.2002 to 31.01.2003 O-i-A No. 66/2004 dt; 28.07.2004 Rs. 16,42,849/-
E/534-537/2005 Sampre
-do-
01.03.2001 to 30.09.2003 O-i-A Nos. 212 to 215/2004 dt: 28.12.2004 Rs. 2,22,335/-
E/740/2005 Sampre
-do-
01.03.2000 to 28.02.2001 O-i-A No. 205/2004 dt: 21.12.2004 Rs. 3,00,213/-
E/965/2005 Roys
-do-
01.08.2003 to 31.03.2004 OIA No. 94/2005 dt: 29.07.2005 Rs. 20,92,924/-
E/1102/2005 Prayagh
-do-
01.08.2002 to 30.11.2004 O-i-O No. 20/2005 dt. 06.09.2005 Rs. 1,54,67,265/-
E/131/2006 Roys
-do-
15.10.2004 to 13.06.2005 O-i-A No. 118/2005 dt: 28.10.2005 (No quantified demand. O-i-O rejecting the assessees request for provisional assessment under Section 4 was upheld.) E/280/2006 Roys
-do-
01.04.2004 to 31.03.2005 O-i-A No. 129/2005 dt: 30.12.2005 Rs. 22,11,529/-
2.2. E/1103/2005 was filed by the Managing Director of the assessee-company (appellant in E/1102/2005) and the same is against a penalty of Rs. 5,00,000/- imposed under Rule 26 of the Central Excise Rules, 2002.
3. All the three assessees namely Sampre, Roys and Prayagh are manufacturing sugar confectionery, on job work basis, out of raw materials supplied by the principal manufacturers, M/s. Cadburry India Limited in respect of Sampre and Roys, and M/s. ITC Limited in respect of Prayagh. After filing price declarations with the proper officers of Central Excise, they determined the assessable value of the goods in terms of Ujagar Prints formula and paid duty accordingly. It was this assessment under Section 4 of the Central Excise Act that was questioned by the department which required the assessees to determine the assessable value under Section 4A of the Act and pay differential duty. This dispute has ultimately reached us. Of course, it is not in dispute that the subject goods were notified under Section 4A ibid for MRP-based assessment.
4. In order to ascertain the correct method of assessment to be adopted by the assessees, it is necessary to understand their pattern of clearance of the goods, which is as stated below assessee-wise:-
(A) Sampre:
E/1244 & 1245/2004:
Confectionery items twist-wrapped in laminated film and packed in pet jars were cleared to M/s. Cadburry India Ltd. The net weight was declared as 11 gms. and MRP declared as Rs. 3/- on the label of each piece. The brand name Mr. Pops was also displayed on the label. Each pet jar contained 55 pieces.
E/534 to 537/2005:
In the first case, individual pieces (each piece weighing 6 gms. or 5.8 gms.) separately twist-wrapped with printed laminated film were packed into pet jars (total weight of the contents of each pet jar being a little above 1 kilogram) or pouches (each pouch containing 0.591 Kg. of confectionery pieces).
In the second case, each pet jar contained 314 pieces (942 grams) or 400 pieces (1.2 Kg.).
In the third case, each pet jar contained 70 pieces weighing 980 grams. The label of each piece showed the declared net weight of 14 grams and the declared MRP of Rs. 2/-.
In the remaining case, two varieties of confectionery were cleared under the brand names Googly Orange and Googly Assorted. In respect of the first item, each pet jar contained 230 units (621 grams) or 314 units (942 grams). In respect of the second item, each pet jar contained 400 units (1200 grams). The price of each unit (piece) of both the above varieties was declared as 0.50 paise on the jar.
E/740/2005:
In this case, the product Cadburys Dairy Milk Eclairs weighing 6 grams was twist-wrapped with printed laminated film and 167 such pieces weighing 1 Kg. were packed in a pet jar and 12 such pet jars were further packed in cardboard cartons and cleared to the depots of M/s. Cadbury India Ltd. The price of each piece was marked on the pet jar as Re. 1/- per piece.
(B) Roys:
E/965/2005 & E/280/2006:
Each piece of their products namely Caram Eclairs and Choco Eclairs weighing 5.5 grams approximately was twist-wrapped with printed laminated film and such pieces were packed into 825 gm. pet jars/220 gm. poly bags. Both on wrapper and on the pet jars/poly bags, MRP per unit was marked Re. 1/-. Both the products were manufactured as job workers of M/s. ITC Limited and cleared to the latter.
E/131/2006:
Each piece of products namely Eclairs and Choco Eclairs was twist-wrapped with printed laminated film with MRP marked thereon as 0.50 paise and Re. 1/- respectively. Eclairs, each piece weighing 4 grams were packed into 720 gm. pet jars/420 gm. poly bags. Choco Eclairs each piece weighing 5.5. grams were packed into 825 gm. pet jars/412.5 gm. poly bags. Rs. 90/- (180 units) and Re. 1/- per unit were marked respectively on the labels of the pet jars of Eclairs and Choco Eclairs. Rs. 50/- (100 units + 5 free) and Rs. 75/- (75 units) were marked on the poly bags of Eclairs and Choco Eclairs respectively. Both the products were cleared to M/s. ITC Limited.
(c) Prayagh:
E/1102/2005:
Sugar confectionery in four different flavours viz. mango, banana, pineapple and orange were manufactured as job workers of M/s. ITC Limited and cleared to them under the brand name Candyman. The relevant particulars are as shown below:-
1.
Mango/Banana: 12 kg.
Each carton contains 12 No. of jars each weighing at 1 kg. containing 286 No. of candies with MRP printed as 50 NP per unit.
2. Mango/Banana: 16 kg.
Each carton contains 32 No. of poly bags, each containing 500 gms. containing 143 Nos. of candies with MRP printed as 50 NP per unit.
3. Mango/Banana: 6 kg.
Each carton contains 12 No. of jar. Each jar contains 500 gms. and each jar contains 143 No. of candies with MRP printed as 50 NP per unit.
4. Mango/Banana/ Pineapple/Orange: 18 kg.
Each carton contains 90 poly bags each weighing 200 gms. of candies. Each poly bag contains 58 No. of candies with MRP printed as 50 NP per unit.
5. Mango/Banana/ Pineapple/Orange: 11.25 kg.
Each carton contains 15 jars. Each jar weighs 750 gms. and contains 215 No. of pieces. MRP printed as 50 NP per unit.
5. The assessees had claimed before the lower authorities that the pet jars/polybags (pouches) containing several pieces/units of confectionery each twist-wrapped with printed laminated film were wholesale packages and hence they were not required to affix MRP on such packages. They had also claimed exemption under Rule 34(b) read with Rule 2(x) of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (hereinafter referred to as SWM (PC) Rules). Therefore they argued that the goods were not to be assessed to duty under Section 4A of the Central Excise Act. These arguments were rejected by the authorities who held that, as the individual pieces contained in the pet jars/polybags (pouches) were separately packed and were capable of being sold in retail, the pet jars/polybags (pouches) were to be considered as retail packages attracting MRP provisions. It was observed that, at the stage when the individual pieces were packed by twist-wrapping with laminated film, a retail package emerged and the provisions of the SWM (PC) Rules regarding declaration of retail sale price were attracted and, consequently, the provisions of Section 4A of the Central Excise Act came to be applicable. The pet jars/polybags were held to be multi-piece packages under Rule 2(j) of the SWM (PC) Rules and that the individual pieces were intended for retail sale. The assessees claim for exemption under Rule 34(b) was rejected by the authorities on the ground that such exemption was applicable only to packaged goods which were sold in weight or measure and not applicable to goods sold in numbers. According to the authorities, the individual pieces were generally sold in numbers in the retail market of ultimate consumers. In the result, the goods in question were held to be assessable to duty of excise in terms of Section 4A of the Central Excise Act and the differential amount of duty came to be demanded.
6. It appears from the records that, by Miscellaneous Order No.415/2006 dated 5.6.2006 in appeals E/965/05 and E/280/06 of M/s. Roys Industries Ltd., this Bench had referred the following questions to a Larger Bench for its decision:
(i) Whether the Pet Jars/Poly Bags containing individual pieces of Eclairs weighing less than 5.5 gms. each should be considered as a wholesale package as contended by the appellants and agreed by the Mumbai Bench or whether they should be considered as multi-piece package as per the views of this bench?
(ii) Whether the exemption under Rule 34(b) of Standards of Weights & Measures (Packaged Commodities) Rules, 1977 available for individual pieces is relevant for deciding if the assessment has to be done under Section 4 or 4A of the Central Excise Act?
(iii) Whether the assessment of the impugned products should be done under Section 4 or Section 4A of the Central Excise Act?
A learned Member of the Larger Bench held, in view of the Supreme Courts order dt.15.9.2008 in Civil Appeal No.7559 of 2008 [D.19192 of 2008] (Central Arecanut and Cocoa Marketing and processing Co-op. Ltd.) and the courts order dated 14.9.2010 in Civil Appeal No.1290 of 2007 (Swan Sweets Pvt. Ltd.), held that the pet jars/polybags containing more than 10 individual pieces were wholesale packages and that the individual pieces each weighing less than 10 grams were excluded from MRP-based assessment by virtue of Rule 34(a) of the SWM (PC) Rules. The other two learned Members of the Bench dissented by holding that if the total weight of a multi-piece package was more than 20 grams the exemption under Rule 34 would not be applicable and consequently MRP-based valuation under Section 4A would apply. The majority order of the Larger Bench (Misc. Order No.378/2010 dt.14.9.2010) reads as follows:
1. The questions referred to the Larger Bench are answered as under:
(i) The finding of fact by the referral Division Bench that the impugned poly packs and pet jars are multi-piece retail packages, based on facts of this case and evidence available in this case, if sound.
(ii) The exemption under Rule 34(b) of the Rules will be available in respect of a multi-piece retail package if the total weight of all the pieces in the package does not exceed the prescribed limit as held by Kraftech Products (supra) and Urison (supra).
(iii) In view of the finding of fact by the referral Bench in this case that the impugned poly packs and pet jars are multi-piece retail packages and the total weight of the pieces in such packages exceed 20 grams, the exemption under Rule 34(b) is not applicable and consequently, the assessment is required to be done applying provisions of Section 4A.
2. The Registry is directed to return the appeals to the referring Division Bench for passing the final order.
7. Heard both sides. The learned counsel for M/s. Roys Industries Ltd. pointed out that the view taken by the West Zonal Bench (Mumbai) of the Tribunal in the case of Swan Sweets Vs. CCE: 2006 (198) E.L.T. 565 on a set of facts similar to the facts of the present cases was upheld by the Supreme Court by its judgment dated 14.9.2010 reported in 2010 (259) E.L.T. 5 (SC) and, therefore, the said view was binding on this Tribunal by virtue of Article 141 of the Constitution of India. In this connection, the learned counsel also referred to Kunhayammed vs. State of Kerala: 2001 (121) ELT 11 (SC). The learned counsel submitted that the view taken by the Tribunals Larger Bench in Roys Industries case was not good law in view of the apex courts judgment in Swan Sweets case. It was further pointed out that the Larger Bench while passing its order dated 14.9.2010 did not consider the Honble Supreme Courts order in CC vs. Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd. [2008 (232) E.L.T. A107 (SC)]. In any case, in a conflict between a decision of this Tribunal and one of the Supreme Court, the latter would prevail. In this context, the counsel referred to Mira Silk Mills vs. CCE: 2003 (153) E.L.T. 686 (Tri.-LB). The learned counsel also referred to some of the provisions of SMW (PC) Rules, which were said to be relevant to the issue under consideration. The definitions of combination package [Rule 2(c)], group package [Rule 2(g)], multi-piece package [Rule 2(j)], retail package [Rule 2(p)], retail sale [Rule 2(q)], retail sale price [Rule 2(r)] and wholesale package [Rule 2(x)] were particularly referred to by the counsel who argued that, while a wholesale package was not intended for retail sale, other packages were intended for retail sale. It was claimed that the pet jars/polybags (pouches) were not intended for retail sale and hence there was no requirement of display of MRP thereon. Relying on the apex courts judgment in CC vs. Kraftech Ltd. [2008 (224) E.L.T. 504 (SC)], the learned counsel argued that the view taken by CBEC in Circular No.492/58/99-CX. dt.2.11.1999 on the basis of the Law Ministrys opinion that Rule 34 did not apply to multi-piece packages was not correct. Nevertheless, it was contended that the pet jars/pouches which were not intended for sale direct to a single consumer but was meant for disposal through an intermediary must be considered as wholesale packages. According to the learned counsel, what was relevant was the intention underlying the packing of the goods. This intention was to be gathered from the declaration made on the package. The labels on both the jumbo packs (pet jars/pouches) clearly directed the intermediary to open the package and sell the individual confectionary pieces to the ultimate consumers. Whether a packed commodity was intended for retail sale or not would depend on the manufacturer and his marketing pattern. In the present case, it was not in dispute that the jumbo packs were not intended to be sold to the ultimate consumer. The individual pieces of confectionary only were to be sold to the ultimate consumers. In this view, the jumbo packs were to be considered as wholesale packages. The learned counsel pointed out that an identical dispute was settled in favour of the assessee by this Tribunal in the case of Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd. vs. CCE: 2008 (226) ELT 369 (Tri.-Chennai) and that the Civil Appeal filed by the Revenue against that decision was dismissed by the apex court vide 2008 (232) ELT A107 (SC). It was also pointed out by the learned counsel that the Chennai Bench, in the cited case, relied on the decision rendered by the coordinate Bench (Mumbai) in the case of Swan Sweets Pvt. Ltd. The decision in Swan Sweets case was also affirmed by the apex court. In this scenario, the learned counsel urged that the view taken in the cases of Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd. and Swan Sweets Pvt. Ltd. be followed in the present case. This apart, exemption under Rule 34(b) of the SMW (PC) Rules was also claimed in respect of individual pieces of confectionary. It was pointed out that, in terms of the Rule, if a packaged commodity having net weight of 20 grams or less was sold by weight, then none of the provisions of the SMW (PC) Rules would apply and, consequently, any requirement to affix MRP even on the individual pieces of confectionary was ruled out.
8. The learned Additional Commissioner (AR) submitted that, with the decision of the Tribunals Larger Bench on the issues referred from the case of M/s. Roys Industries Ltd., the question whether the assessment in these cases was required to be made in terms of Section 4 or 4A of the Central Excise Act stood settled in favour of the Revenue and therefore the demands of duty were only liable to be upheld. It was submitted that the decision of the Larger Bench was not challenged by the assessee (M/s. Roys Industries Ltd.) and the same was binding on them. It was further pointed out that the Larger Bench had distinguished the ratio of the decision in Swan Sweets case and had correctly applied the ratio of the decision in CCE, Mumbai vs. Urison Cosmetics Ltd.: 2006 (198) ELT 508 (Tri.-LB), to the facts of the case on hand. In this manner, the learned Additional Commissioner (AR) endeavoured to defend the orders impugned in the assessees appeals.
9. We have given careful consideration to the submissions. The Larger Bench which considered the issues referred to by this Bench in the case of M/s. Roys Industries Ltd. rendered a split verdict. The minority view, which is in favour of the assessee, is to the effect that, with the dismissal of Civil Appeal No.7559/2008 (which was filed by the Commissioner of Central Excise, Mangalore against the Tribunals decision in the case of Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd. vs. Commissioner: 2008 (226) ELT 369) by the Supreme Court, the issue stands settled in favour of the assessees. The majority view is based on the Supreme Courts judgment in CCE vs. Kraftech Products coupled with the Tribunals Larger Bench decision in the case of Commissioner vs. Uricson Cosmetics Ltd. and the same is to the effect that, as the total weight of multi-piece retail package (pet jar/polybag) is more than 20 grams, the exemption under Rule 34(b) is not available and consequently the goods must be assessed to duty on the basis of MRP in terms of Section 4A.
10. Placed as we are between the split verdict of the Larger Bench and the judgments of the apex court, we have got to identify the binding case law.
11. On a close study of the decisions cited before us, we find (a) that the facts of the case of Swan Sweets Pvt. Ltd. are similar to the facts of the present cases and that, in the said case, a coordinate Bench of this Tribunal held pouches (polybags) of 500 grams and pet jars of 720 grams of sugar confectionary units to be wholesale packages and also held these packages to be within the exemption provided under Rule 34(b) of the SWM (PC) Rules; (b) that Civil Appeal No.1290/2007 filed by the department against the Tribunals decision in Swan Sweets case was dismissed by the Supreme Court vide 2010 (259) ELT 5 (SC); (c) that, in the case of Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd.: 2008 (226) ELT 369, another coordinate Bench of this Tribunal found the facts of the case to be similar to those of the case of Swan Sweets Pvt. Ltd. and, accordingly, packets each containing 100 or more pieces of Eclairs chocolates each piece weighing 5.5 grams were held to be wholesale packages and to be excluded from Section 4A assessment; (d) that Civil Appeal No.7559/2008 (D19192/2008) filed by the department against the said decision of this Tribunal was also dismissed by the apex court vide 2010 (259) ELT 5 (SC); and (e) that the apex courts decision in Swan Sweets case having been rendered at a later point of time (14.9.2010) than its decision in the case of Kraftech Products (14.3.2008) has to be followed as a binding precedent even if any conflict or inconsistency be found between the two decisions of the apex court. Accordingly, we are of the view that the majority decision of the Larger Bench in the case of Roys Industries cannot be followed as a precedent inasmuch as the binding judgments of the apex court in the cases of Swan Sweets Pvt. Ltd. and Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd. exist in favour of the assessees.
12. In the result, with due respect to the decision of the Larger Bench in Roys Industries case, we must follow the apex courts judgment in Swan Sweets case and Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd. case. Accordingly, we set aside the impugned orders and allow these appeals.
(Operative portion of this Order was pronounced in open court on conclusion of hearing) (B.S.V. MURTHY) Member (Technical) (P. G. CHACKO) Member (Judicial) rv ??
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